Multinationals in Less Developed Countries: A Case Study of Drug Multinationals in India

Abstract

India, like other less developed countries, welcomed MNCs, with the belief that they would help India industrialize by supplementing local savings, bringing in technology and foreign exchange for the import of necessary capital goods etc. This paper attempts to examine the extent to which the above expectations of the government of India were realized, with the help of a case study of the drug and pharmaceutical industry. The empirical analysis presented in the paper reveals that basic interest as well as the strength of MNCs' operations in this supposedly technology-intensive industry is in marketing and not in research and development. Drug MNCs have concentrated more on the production of low technology formulations and over-the-counter luxury items than on high technology and life saving bulk drugs. They have been found to be hampering the indigenous development of technology. Far from supplementing domestic savings, drug MNCs have utilized local capital resources to strengthen their stranghold over the industry. Finally, the operations of MNCs were found to have a markedly adverse impact on India's balance of payments, contrary to earlier expectations. MNCs have also been found to be indulging in unauthorised imports and in transfer pricing to the detriment of Indian interests. On the basis of the above case study, therefore, it would appear that for the LDCs MNCs are a bane not a boon.